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Naira Declines for Third Day on Interest Rate Bets

By on January 31, 2012

Nigeria’s naira weakened against the dollar for the third day on speculation the nation’s central bank will probably leave its benchmarkinterest rate unchanged.

The currency of Africa’s biggest oil producer depreciated 0.2 percent to 161.25 per dollar on the interbank market as of 4:49 p.m. in Lagos, its weakest since Jan. 24, according to data compiled by Bloomberg. Nigeria sold $250 million at a twice- weekly foreign currency auction today, with the marginal rate, also used as the prevailing exchange rate, down 0.1 percent to 157.05 naira, the Abuja-based Central Bank of Nigeria said.

Nigeria’s central bank announces its decision on its key interest rate tomorrow in Abuja, the capital. The rate, which was left unchanged at a record-high 12 percent on Nov. 21, may be held “for a bit” as increases in fuel prices add pressure to inflation, central bank Governor Lamido Sanusi said Jan. 16.

“Lowering the exchange rate or leaving it unchanged which is likely, will favor borrowing and possible increase in the demand for dollars, which will be the reverse if central bank raises the rates,” Usman Onoja, chief executive officer of Lagos-based Lovonus Trust and Investment Ltd., said today by phone.

Nigeria’s annualized consumer inflation rate fell for the first time in four months to 10.3 percent in December from 10.5 percent a month earlier, the National Bureau of Statistics said.

“The focus of the central bank will be the outlook for inflation following the increase in the price of petrol and the risk of fiscal expansion,” Gregory Kronsten and Olubunmi Asaolu, analysts at Lagos-based FBN Capital Ltd., said in an e- mailed note to clients today. “Both areas are marked by uncertainty and our view therefore is that the policy rate of 12 percent will be unchanged.”